Exxon predicts fossil fuels will reign supreme through 2040

By Jennifer A. Dlouhy, Washington Bureau

Updated 8:05 pm, Thursday, December 12, 2013

Photo: Eric Kayne / For The Houston Chronicle

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“Natural gas emerges as an easy and practical choice,” said William Colton, Exxon Mobil's vice president of corporate strategic planning, noting that a plant such as this one in Baytown can be built quickly and for reasonable costs. less

“Natural gas emerges as an easy and practical choice,” said William Colton, Exxon Mobil's vice president of corporate strategic planning, noting that a plant such as this one in Baytown can be built quickly ... more

Photo: Eric Kayne / For The Houston Chronicle

Exxon predicts fossil fuels will reign supreme through 2040

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Washington — WASHINGTON — Oil and gas will provide the bulk of the energy needed to fuel the world by 2040, with most of it coming from North America, Russia and the Middle East, Exxon Mobil Corp. predicted Thursday.

According to the latest version of the company's annual long-term outlook, the two fossil fuels will reign supreme in three decades, with gas displacing coal to become the largest electric power generator in the mid-2020s, second only to oil as an energy source.

The environmental benefits and relatively low price tag of natural-gas-based power will drive that transition as countries continue to establish pollution limits that constrain coal, said William Colton, Exxon Mobil's vice president of corporate strategic planning. And while nuclear power will be competitive with coal, Colton said, it will remain more expensive than natural gas as a source of electricity.

With coal hit by environmental limits, nuclear power facing constraints to expansion and solar and wind-based power limited by their intermittent nature, “natural gas emerges as an easy and practical choice,” Colton said. “It doesn't require new technology, the cost to build a new plant is reasonable and they can be built quickly,” he said, noting also that natural gas power plants can be fired up and shut down faster than coal plants as demand varies.

Exxon Mobil made similar prognostications in its 2011 annual outlook. The documents are public versions of the internal predictions that help guide the company's multibillion-dollar investments in projects spanning decades.

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The Irving-based oil company factors a carbon cost of $60 per ton into its outlook, in recognition of the implied price tag posed by existing and looming environmental regulations worldwide. That's down from an $80-per-ton forecast two years ago.

Ken Cohen, Exxon Mobil's vice president of public and government affairs, said the company's projected carbon cost is a pragmatic recognition of the regulatory landscape around the globe — not an endorsement of any kind of explicit carbon tax.

“Once we put the steel in the ground, we are living with that basic cost through decades, different political regimes and controls and regulations,” Cohen said.

Exxon Mobil does not make specific policy recommendations in its annual outlook, but Colton and Cohen used the document's release Thursday to stress the importance of free-trade policies to a Washington audience.

A 38-year-old law effectively bars exports of crude as well as other commodities in short supply, although the Commerce Department historically has issued waivers allowing oil sales to Canada. Crude harvested from Alaska's Cook Inlet also has been sold to other countries. But oil industry leaders are gearing up for a bigger fight over broader crude exports.

“A healthy market should have imports and exports on an ongoing basis,” Colton said. “A very healthy market,” for instance, could “have some imports coming into the East Coast and exports from the Gulf Coast, and they can net to zero and you still have lots of trade.”

“We would like to hope that even in the year 2040, there would be a very robust trade of both crude and (refined) products,” Colton said.

Among other predictions in this year's outlook:

Oil and gas demand will grow in Europe and Asia. Asian countries, which are already dependent on imported energy, will see their reliance on foreign sources grow further, and 60 percent of Europe's energy consumption will be fed by foreign suppliers as its own production declines. “For both oil and gas, Europe and Asia remain the two key importing areas,” Colton said, while the Middle East and Russia will stay the biggest exporters.

Hybrids will emerge as the dominant vehicle on the roads in 2040. The vehicles, which include an internal combustion engine and an electric motor, will account for about half of global new-car sales by 2040, Exxon Mobil says. And while there is big interest in using natural gas as a transportation fuel, that shift will occur mainly among heavy-duty commercial vehicle users.